Coffee Shop Fueled by Budget-Conscious Pricing

When Adam Banks opened a coffee shop in Chicago’s trendy Wicker Park neighborhood in July, he was determined not to gouge customers with $5 to $7 espresso drinks. Coffee, he believes, should be accessible to everyone, including people on a tight budget. Beverages at his establishment, Ready Coffee, cost $1 to $3.

Ready Coffee also aims to be a neighborhood gathering spot: Ready’s OrNot Gallery supports local artists (an Art-o-mat vending machine sells miniature works for $5 each), and the shop hosts free Saturday-morning yoga classes. Coffee beans are roasted in town, and pastries include doughnuts from local favorite Dinkel’s Bakery.

Banks’ business model was inspired by his senior project as an MBA student at the University of Chicago. The Intuit Small Business Blog recently caught up with Banks, who graduated in May, to chat about his mission to make coffee more affordable.

ISBB:What inspired you to launch a menu of budget-friendly prices for coffee and espresso drinks?

Banks: My caffeine addiction requires a few lattes a day. At Starbucks, each costs over $5. That just feels expensive to me. It doesn’t feel right to me when I pay that. I notice that many people avoid Starbucks and will walk much farther to a Dunkin’ Donuts to save money on coffee. We want to deliver a curated experience to those customers and to people like me [who] don’t want to overpay and don’t want to wait in line.

What’s the market like for independent coffee shops, given that there are quite a few chains? How can an indie cafe compete?

There is an obvious race going on in the upper end of the market, and there are companies doing it really, really well, like Blue Bottle Coffee and La Colombe Coffee. I wouldn’t enter that market unless I thought that I could do it better than Blue Bottle, and I think that would be very difficult.

There is a lot of room for the indie shops. Coffee will always be a very local business. You can’t buy hot coffee on the internet, so Amazon will never go into the business. Customers go to the coffee shop that they can walk to, the one that’s on their way to work, or the one that’s close to their office. Stores that are more than several blocks away from one another often are not competing. Customers really do like the indie shop, and no chain has mastered how to maintain the indie feel after three or four stores.

How does having an MBA give you a leg up in launching a small business?

I got an MBA late in the MBA game, at 38 years old. … I already have successful businesses, and it’s easy to make the argument that I didn’t need it. I got the MBA because I wanted it. It has turned out to be in incredible investment for me, paying out in way that I never imagined: Every company that I am involved with is doing better because of my MBA.

The University of Chicago taught me to think in terms of statistics; I look at ways to quantify every aspect of my businesses now. The marketing course was called Quantitative Marketing. I task my marketing team to deliver numbers, not just slogans.

What do you see happening now that Starbucks is increasing its prices?

It’s no secret that the competitive strategy of Ready Coffee is to compete on price. We deliver an outstanding product at a great price. We roast every day in Chicago. Bean to bean, our quality is as high as it gets. It shocks me what customers are willing to pay for a cup.

Starbucks is comparable to Microsoft: Both are juggernauts. There are so many competitors to Microsoft, and there is room for a lot of them to make money, especially in the world of apps — but most of us still need Word and Excel. Starbucks raising its prices makes room for other companies.

What are today’s coffee lovers looking for in a cafe experience?

There is not one experience. Indie coffee shops are very cookie-cutter, trite, and expected, almost to the point where they often feel dirty to me. I feel too old to sit in a couch that reminds me of my college apartment. Ready is looking to be more sophisticated and cheaper, yet sharper and cleaner.

Coffee shops offer a place to meet that is not a bar. There are not a lot of places that offer customers a nice space to sit at for long periods (with free Wi-Fi). Coffee shops actually provide a lot of services to customers for very little money: Wi-Fi, bathrooms, and a quiet space to work.

How important is it for you to source local products?

Coffee shops are the only business that I can think of that are held to an extremely high standard of being local and green. No one goes into a Subway and questions the origin or compostability of a soda-fountain cup. It’s almost expected that indie coffee shops overdo “being local.” The best example that I see of this is the kraft-paper cups that many shops use. [Brown] kraft paper is often made out of virgin wood, whereas the white-paper cups are often recycled content.